US oil companies sell assets overseas to invest at home

May 10, 2013

ConocoPhillips, for example, has refocused its attention to the Eagle Ford Shale and Bakken Shale -- two of the largest deposits of shale gas and oil.

With the U.S. oil and gas industry continuing to grow, and with news that fossil fuel reserves might be far richer than previously estimated, an increasing number of U.S. companies are reconsidering their operations abroad and preferring to invest in the North American market.

According to CNN, a number of large American companies have already made arrangements to sell their assets abroad and to redirect their capital toward domestic projects. This is not a new trend, as last year energy corporation ConocoPhillips announced it was planning to sell its stake in the Kashagan oil field in Kazakhstan for $5 billion. According to Petroleum Listing Service (PLS) this was just one of several major sales for ConocoPhillips last year, at an estimated total value of $11 billion.

A large proportion of this capital has now been redirected to operations in Texas and North Dakota, CNN reported. PLS managing director Brian Lidsky said that ConocoPhillips had refocused its attention to the Eagle Ford Shale and Bakken Shale -- two of the largest deposits of shale gas and oil. A spokesperson for the company confirmed the sales and explained that Conoco was using the money to explore new opportunities for the future.

Another big player on the global oil market, U.S. company Hess, also put its assets in Russia, Azerbaijan and the U.K. up for sale and managed to generate more than $4 billion in the deals. It said that the money was used for various purposes, including enhancing the company's balance sheet and paying down debt. CNN quoted a spokesman for Hess who stated that the company invested more than $3 billion in North Dakota last year and increased its oil production by 55%.

Similarly, other American oil companies -- including Devon, Anadarko, Murphy, Marathon and Noble Energy -- have closed deals on selling their overseas assets over the past few years and have all invested in U.S. reserve development. Apart from Texas and North Dakota, other attractive locations for investment are Colorado's Niobrara and Pennsylvania's Marcellus Shale, PLS said.

Joe Stanislaw, an independent energy adviser at Deloitte, explained that both large and smaller companies are trying to build on their presence in the United States and one of the main reasons is that the U.S. business environment is relatively friendly, facilitating operations. In many countries, developing oil fields involves numerous regulatory and financial challenges, while the U.S. industry is not that restrictive. For example, in countries like Iran and Libya about 90 percent of a company's profits are swallowed up by taxes and royalties whereas in the United States the amount rarely exceeds 50 percent. In addition, there is a better understanding of the geology of the United States because more research has been carried out, and there are more skilled workers in the country, CNN said. All these factors contribute to making the United States an appealing destination for companies and the effect of the growing investment is likely to be reflected in future years, as the United States is expected to become the world's largest producer of oil by 2020.